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Definition: Bitcoin
(1) For a comparison of the two largest blockchain platforms, see Bitcoin vs. Ethereum.
(2) The largest cryptocurrency by market capitalization. In 2009, Bitcoin was launched as a "peer-to-peer electronic cash system" by a person with the alias Satoshi Nakamoto (see Bitcoin authorship). The first cryptocurrency, Bitcoin spawned a revolution in finance (see Web3). Although merchants increasingly accept bitcoins as payment, many people buy and hold for speculation because the current price per coin is based on market demand (see hodling). Since its inception, the value of a single coin has skyrocketed, and thousands of other cryptocurrencies have been created. For a complete list, visit CoinmarketCap.com or CryptoCompare.com. See crypto craze, Bitcoin pizza, orange pilled and blockchain.
Three Distinct Features
Decentralized
First is Bitcoin's architecture. Bitcoin is a decentralized, transparent ledger of coin ownership that has no bank or government middleman. Anyone can view all the Bitcoin transactions that have ever taken place.
Cryptography Enables Privacy and Immutability
Secondly, Bitcoin adds privacy by using cryptography to partially hide both parties' identities. The transaction is public; for example, on June 1, 2018, Bitcoin address A sent 2.5 bitcoins to Bitcoin address B. However, although the names of both parties are not public, their addresses are public, and given time and effort, addresses can be traced to owners (see Bitcoin address).
Bitcoin Is Inflation Proof
Lastly, there is a maximum number of bitcoins that come into existence every year, and as of 2022, there are approximately 18 million. When Bitcoin reaches 21 million coins in 2140, coin creation ceases. Bitcoin is called "digital gold," because gold is said to be a hedge against inflation. However, the future amount of gold in the world is unknown; whereas, Bitcoin's limit is known. See Bitcoin mining and public key cryptography.
Underground and Above Board
Although used for clandestine transactions on the Dark Web, thousands of legitimate businesses worldwide accept Bitcoin. In 2021, Tesla added Bitcoin to its order form but removed it soon after claiming it uses too much of the world's electricity (see Bitcoin mining). See ransomware and Dark Web.
Anyone Can Buy, Transfer and Sell Bitcoins
Users access their coins from a digital wallet in their own device or employ the services of a crypto exchange the same as opening a bank or brokerage account. Coins are bought with national currencies, and a fee is paid for every transaction. See Bitcoin wallet, Bitcoin exchange and Bitcoin ATM.
A Roller Coaster Ride
Bitcoin Split
In 2017, Bitcoin split into three versions, and the original Bitcoin was enhanced for performance (see Bitcoin Cash, Bitcoin Gold and SegWit).
Bitcoins Are Mined!
The unusual thing about bitcoins is the way they come into existence. Bitcoin "miners" compete with each other to update the blockchain with new transactions, and they are rewarded with bitcoins created "out of the blue" for their own account. See Bitcoin mining.
Traction - Then Hacking
In late 2010, Bitcoin was becoming popular in the open source and underground communities. By mid-2011, there was an attack on the Japan-based Mt. Gox exchange, and a hacker extracted coins worth nearly $450 million. See Mt. Gox.
Who Is Satoshi Nakamoto?
Nakamoto's true identity has never been disclosed. However, no matter who Nakamoto is, in order to commemorate the developer, the smallest fraction of a bitcoin is called a "Satoshi." See Satoshi.
Government Printing vs. Bitcoin Generation
Bitcoins have nothing to back them up but the faith of the people using them. Although the same might be said of U.S. currency after it was divorced from the gold standard in 1971, the U.S. has the IRS to ensure that people pay taxes. Nevertheless, proponents claim that Bitcoin and other blockchain networks are revolutionizing money worldwide. See BIP, Bitcoin transaction, Bitcoin vs. Ethereum, stablecoin, Silk Road and crypto glossary.
Nakamoto's Own Words
Perhaps nobody can describe Bitcoin better than its inventor, who sent out an email on October 31, 2008 describing his creation (see Satoshi Nakamoto).
Essential Reading for Enthusiasts
(2) The largest cryptocurrency by market capitalization. In 2009, Bitcoin was launched as a "peer-to-peer electronic cash system" by a person with the alias Satoshi Nakamoto (see Bitcoin authorship). The first cryptocurrency, Bitcoin spawned a revolution in finance (see Web3). Although merchants increasingly accept bitcoins as payment, many people buy and hold for speculation because the current price per coin is based on market demand (see hodling). Since its inception, the value of a single coin has skyrocketed, and thousands of other cryptocurrencies have been created. For a complete list, visit CoinmarketCap.com or CryptoCompare.com. See crypto craze, Bitcoin pizza, orange pilled and blockchain.
Three things set Bitcoin and other cryptocurrencies apart from other information systems as follows:
Decentralized
First is Bitcoin's architecture. Bitcoin is a decentralized, transparent ledger of coin ownership that has no bank or government middleman. Anyone can view all the Bitcoin transactions that have ever taken place.
Cryptography Enables Privacy and Immutability
Secondly, Bitcoin adds privacy by using cryptography to partially hide both parties' identities. The transaction is public; for example, on June 1, 2018, Bitcoin address A sent 2.5 bitcoins to Bitcoin address B. However, although the names of both parties are not public, their addresses are public, and given time and effort, addresses can be traced to owners (see Bitcoin address).
Bitcoin Is Inflation Proof
Lastly, there is a maximum number of bitcoins that come into existence every year, and as of 2022, there are approximately 18 million. When Bitcoin reaches 21 million coins in 2140, coin creation ceases. Bitcoin is called "digital gold," because gold is said to be a hedge against inflation. However, the future amount of gold in the world is unknown; whereas, Bitcoin's limit is known. See Bitcoin mining and public key cryptography.
Underground and Above Board
Although used for clandestine transactions on the Dark Web, thousands of legitimate businesses worldwide accept Bitcoin. In 2021, Tesla added Bitcoin to its order form but removed it soon after claiming it uses too much of the world's electricity (see Bitcoin mining). See ransomware and Dark Web.
Anyone Can Buy, Transfer and Sell Bitcoins
Users access their coins from a digital wallet in their own device or employ the services of a crypto exchange the same as opening a bank or brokerage account. Coins are bought with national currencies, and a fee is paid for every transaction. See Bitcoin wallet, Bitcoin exchange and Bitcoin ATM.
The value of bitcoins fluctuates on the crypto exchanges with huge volatility. From virtually nothing to more than $60,000 in 10 years, Bitcoin created a market cap of more than $1 trillion. The huge rise in 2017 caught the world's attention.
Bitcoin Split
In 2017, Bitcoin split into three versions, and the original Bitcoin was enhanced for performance (see Bitcoin Cash, Bitcoin Gold and SegWit).
Bitcoins Are Mined!
The unusual thing about bitcoins is the way they come into existence. Bitcoin "miners" compete with each other to update the blockchain with new transactions, and they are rewarded with bitcoins created "out of the blue" for their own account. See Bitcoin mining.
Traction - Then Hacking
In late 2010, Bitcoin was becoming popular in the open source and underground communities. By mid-2011, there was an attack on the Japan-based Mt. Gox exchange, and a hacker extracted coins worth nearly $450 million. See Mt. Gox.
Who Is Satoshi Nakamoto?
Nakamoto's true identity has never been disclosed. However, no matter who Nakamoto is, in order to commemorate the developer, the smallest fraction of a bitcoin is called a "Satoshi." See Satoshi.
Government Printing vs. Bitcoin Generation
Bitcoins have nothing to back them up but the faith of the people using them. Although the same might be said of U.S. currency after it was divorced from the gold standard in 1971, the U.S. has the IRS to ensure that people pay taxes. Nevertheless, proponents claim that Bitcoin and other blockchain networks are revolutionizing money worldwide. See BIP, Bitcoin transaction, Bitcoin vs. Ethereum, stablecoin, Silk Road and crypto glossary.
Nakamoto's Own Words
Perhaps nobody can describe Bitcoin better than its inventor, who sent out an email on October 31, 2008 describing his creation (see Satoshi Nakamoto).
Books by Andreas Antonopoulos are incredibly thorough, and this one is no exception. To learn the ins and outs of Bitcoin, this is must reading.